Bulgaria Investment Strategies

Bulgaria has gained popularity for its well priced properties and excellent buy-to-let opportunities. This is a charming country, from the Black Sea Coast to the mountain resorts, Bulgaria has much to offer all types of overseas property investors.

General Factors

Despite unprecedented growth over the past five years, Bulgaria's property market is still emerging and, as a result of millions of foreign investment being pumped into tourist resorts such as Borovets and the Black Sea, the property market remains strong.

A total of 3,716,193 foreigners visited Bulgaria from January to September 2006, according to the State Agency for Tourism. The figures were 5.8% higher than the percentages for the same period the previous year. In fact, Bulgaria is projected to see some 20 million annual tourist arrivals by 2010. This is, of course, excellent news for the Bulgaria property investor who is perfectly positioned to offer rental accommodation to this steady influx of tourists.

Tourists are offered a rich tapestry of attractions in Bulgaria. They can enjoy the popular coastal resorts of the Black Sea Coast (Sunny Beach and Golden Sands, Bourgas) or retreat into the spectacular scenery of mountains, lakes, forests, rivers and waterfall and skiing in the several international-standard ski resorts (Bansko, Borovets, Pomparovo, Chepelare, Vitosha). Alternatively they can enjoy sight seeing (Sofia, Veliko Turnovo) or hiking (Rila Mountains, Rodopi, Jeravna Pirin, Central Balkans). Bulgaria boasts several protected areas including, amongst others, the Pirin National Park, Sinite Kamari National Park and the Bourgas Wetlands.

Due to a huge increase in tourism and foreigners interest in property in Bulgaria, several more golf courses are underway to cater for the growing requirement for golf-based holiday resorts. One of these will be located at Razgrad, in the north-east, about 90km from the Black Sea. More are scheduled to open within the next few years: two at Kavarna and one at Primorsko, near Sozopol. Another course is near completion in the ski town of Bansko. Real estate prices in all golf resorts are set to rise substantially with increased public recognition and media coverage. Ian Woosnam, the 2006 Ryder Cup Captain, has increased international awareness by becoming heavily involved in the development of two of the new golf complexes at Bansko and Balchik, with their accompanying leisure centers and hotels.

This great variety, accompanied by an ever improving infrastructure and ease of access via budget airlines to Sofia's new airport terminal, makes Bulgaria ideally equipped for the tourist industry. Exciting holiday buy-to-let options are now ready to be snapped up by discerning overseas property buyers looking for maximum returns on investment.

Economic Factors

Following decades of Communist rule, Bulgaria has today emerged as one of South East Europe's most robust economies, going way beyond expectations and moving ahead of other nations in this region. The international community now views Bulgaria in a highly favourable economic light due to its exceptionally strong growth figures. GDP growth in Bulgaria in 2006 was an encouraging and stable 5.5%, due to strong investment growth and an increase in domestic demand. This compares admirably with the likes of the UK with economic growth at a rather more sluggish 1.9%.

Efforts to reduce inflation have succeeded, and it is now close to 0 per cent. Meanwhile, the Bulgarian government is driving forward privatisation plans at a great pace. Due to impressive ongoing efforts, the World Bank director for Bulgaria and Romania has now confidently claimed Bulgaria as "a good place for investment", highlighting the fact that in just 3 years, the country has risen from being the World Bank's lowest rated country in this Eastern region, to being the highest. Foreign direct investment (FDI) is expected to reach 4 billion Euros in 2007, compared with 3.5 billion Euros in 2006.

Today, foreign investors are increasingly focusing their attention some of the very exciting real estate prices still on offer in Bulgaria and investments in the right locations are fetching high capital returns of a minimum of 15% per annum.

Political Factors

The Bulgarian Socialist Party (BSP), established in August 2005 dominates Bulgaria's new Cabinet. On 22 October 2006 Georgi Parvanov from the BSP became the new Prime Minister of the coalition government. National Movement, Simeon II, and the Movement for Rights and Freedoms are its coalition partners.

Under the new Cabinet, Bulgaria has undergone rapid construction and modernisation to qualify it for its accession to the European Union. Foreign Minister, Ivailo Kalfin, and the new Cabinet are embracing EU-related laws since membership in January 2007, ensuring Bulgaria a bright new future.

Natural Factors

The natural charms of Bulgaria are becoming better known as increasing numbers of tourists visit and enjoy the great range of outstanding beauty to be found here. With an ideal climate for beach holidays in the summer months as well as skiing and stunning mountain scenery during winter, Bulgaria boasts a wealth of natural charms which provide a solid base for its expanding tourist industry.

Some of the driving natural forces behind Bulgaria's tourism success include "Blue Flag" beaches along the Black Sea coast, accounting for some 354km of the coastline; mountain trails covering an incredible 37,500km of hiking paths and mountain trails, making it a firm favourite with ramblers and explorers;
Roman, Greek and Thracian historical attractions including nine UNESCO world heritage sites and developing top ski resorts at Bansko and Borovets.

Due to its geographical location, Bulgaria is only a short flight of from major European cities and budget airlines are offering travel to Bulgaria easier than ever. Bulgaria is 2 hours and 45 minutes flight time from London.

Sharing its borders with many other countries, including Greece, Macedonia, Romania, Serbia, Montenegro And Turkey, Bulgaria has taken a little from each to form an interesting and unique culture of its own.

Bulgaria is a sparsely populated country roughly the same size as the United Kingdom but its population is only around 7.45 million. Major cities like Sofia are more heavily populated but a feeling of space predominates.

On the Black Sea Coast the average air temperature during the summer months is 27°C and water temperature is around 22°C, making for an appealing climate to attract visitors during most of the year.

Logistical Factors

Increased international flight routes to Bulgarian airports were opened last year, and all foreign carriers operate from Sofia Airport's new Terminal 2 which opened in March 2007. This increased accessibility has encouraged more flights to arrive into Bulgaria and had a significant positive effect on the tourist and property markets.

Bulgaria is only a short 2 ½ to 3 hour flight from the UK and other European locations. Direct scheduled flights with British Airways and Bulgarian Air operate to Sofia all year round. Direct charter flights to Varna and Bourgas on the Black Sea coast run from April to October.

Flights arrive at one of four international airports: Sofia (SOF), the largest of the airports, Varna (VAR), Plovdiv (PDV) for charter flights to the ski resort of Pomparovo, and Bourgas (BOJ) for domestic flights and for summer charter flights to the Black Sea resorts.

Road travel has been greatly modernized in readiness for entry to the EU which took place in January 2007 and huge investment has gone into improvements, in line with the general development of the country's infrastructure. Getting to your destination should be easy and road conditions will be fair.

Short Term Investment Strategy

Key Opportunity

Bulgaria offers remarkable investment opportunities while profits on off-plan purchases have been known to reach as much as 50% upon completion. However, capital growth will undoubtedly slow down eventually and discerning investors are making the most of today’s emerging market prices while opportunities still last for lucrative land, buy-to-let and pure investment options.

Many factors make Bulgaria a strong investment destination: The World Bank predicts economic growth in Bulgaria to continue this year by some 6%. Bulgaria is now serviced by a large number of low cost airlines making it all the more accessible to visitors from all over the globe. As an EU member since Janurary 2007, the country continues to make major improvements to accommodate a booming tourism industry and overall economic growth - all good news to foreign investors in Bulgaria.

Needless to say, early investors always benefit from the best possible prices and largest financial gains - as the demand for Bulgarian property in the popular areas increases, so will the value of prime property units. By far the most popular option is to buy off-plan and it makes financial sense to act while prices are at their lowest with a view to reassigning contracts prior to completion of the project.

For short-term investment, off-plan properties in Bulgaria offer some of the best potential. As anywhere in the world, off-plan prices must always be a good deal lower than prices in comparable completed developments. This gives full power to “flip” investment strategies in which capital investors sell on the unit prior to project completion. It’s important to ensure that the reassignment of contracts is permitted in the off-plan project you are interested in and under what terms. Sometimes, though not always, investors may be charged around 1,000 EUR or a percentage of the purchase price in order to do so.

Highly beneficial finance structures are generally in place and, depending upon the development, investors need pay only between 10% to 30% of the purchase price in the form of a deposit, while the rest is payable when and if they complete. In the case of selling on their contract prior to completion, investors will have made a relatively small capital outlay, while receiving potentially high returns on investment, which in Bulgaria in 2006 amounted to anything between 15% to 50% per annum.


Investors in Bulgarian off-plan developments factor in between 18 and 24 months for construction from reservation to completion stages. Short term investors normally look to profit from a carefully selected, promising market, selling on their unit to mid or long term investors approximately 14 to18 months after making their initial reservation, regardless of whether or not the project is yet completed.

Payment terms will vary; good projects will often offer terms of XXXX deposit with the balance payable upon completion, allowing short term investors to operate their strategy with minimum capital outlay. Of course, the earlier the investment is made, the greater the investment returns. As importantly by entering the project at the earliest possible stage, investors get the best choice of units which will always be first to attract buyers in the future.

Level of Complexity

Short term strategies offer the lowest level of complexity as the purchase has not yet been officially made; therefore, no property taxes or maintenance or management charges are due. This is a simple capital investment, often with no need to proceed to Purchase Contract, or make any mortgage finance arrangements. Remember to check with the developer if there are any charges made to “flip”, or reassign your contract, and at what stage you are permitted to do so, before you proceed.

Risk Assessment

All investors must carefully assess the particular project and units in which they wish to invest. In many cases a wide range of other projects will be under construction and a choice will need to be made. A decision will need to be based on how a particular development or project will outshine its competitors in terms of appearance, location, on-site facilities and the unit itself. Investors will also need to consider issues such as the number of other units available within the particular development, predicted demand as well as the amount of competition for the type of property they wish to invest in.

To curb risk, a short-term investor should normally seek to buy the best possible unit, ie. a corner unit, a penthouse or ground floor unit with a private garden, which will always sell in preference to a standard first floor unit.

Investors need to be clear how their exit strategy is to run. How will the unit be marketed and by whom? How much will the selling agents charge in commission? Should a buyer not be found prior to completion of the property, investors must be confident they can cover payment to completion of the unit and adapt their strategy if necessary.

Short term “flip” investments are undoubtedly more risky than longer term strategies, but, with careful research and planning in place, off-plan purchase in well located Bulgarian projects offers a sound investment with lucrative returns.


The Bulgarian property market today continues to grow in accordance with expert forecasts. Property prices in some locations have risen to more than 30% per annum – one of the highest rates in the world and while this rate is now not so high, it still far exceeds many other European markets.

Shrewd investors have the opportunity to reach the highest figures by selecting prime ski or seaside resorts at pre-release pricing levels, allowing them to invest at below market value.

By reserving at pre-release stage investors profit from discounted prices, allowing them to profit from greater returns upon resale. Reservations on this type of project allow for full refunds if necessary and secure escrow accounts are in place to protect investors’ funds. An earlier than normal reservation of course affords the maximum possible returns on investment on any given project.


The short term investment strategy is purely based on capital outlay as mortgages cannot generally be raised against property that is not yet built. In order to cover all eventualities, investors MUST be confident they can complete the purchase if necessary, even if using a buy to flip strategy.


Purchasing a property and then re-selling prior to completion is a tax-efficient way to invest as it allows buyers in Bulgaria to avoid any property transfer taxes and side-steps capital gains tax, should they choose to sell on the contract prior to project completion.

Medium to Long Term Investment Strategy

Key Opportunity

Bulgaria is considered to be one of the most rapidly advancing nations in Europe today. It is renowned amongst foreign property investors for its interesting coastal and mountain resorts. Excellent property prices and high capital growth projections, combined with Bulgaria's natural advantages of sun, sand, sea, skiing and beautiful, draw property investors, many of whom regard this thriving Eastern European location as one of the world's best emerging markets.

The World Tourism Organisation describes Bulgaria as one of the most appealing "new faces" in the tourism industry today, and it is true that this industry in particular has gone from rags to riches over the past 5 years. The government continues to drive forward plans for this growth sector and tourism currently accounts for some 12% of the Bulgarian GDP.

A forecast by the World Trade Organisation indicates that by the year 2010, the number of tourists visiting the country will annually exceed 20 million, making Bulgaria one of the world's greatest emerging tourism markets. This has obvious positive repercussions for medium to long term property investors in Bulgaria.


Average construction time on Italian projects, from project sales release to completion of construction, is approximately one year. Mid to long term investors look to hold onto their units after construction, normally for at least 18 months from initial reservation, either to rent it out and/or benefit from capital appreciation upon eventual resale. Many long term investors wish to generate significant and reliable rental income over a period of time as sustained rental returns are their main focus, followed by capital appreciation over time.

Capital appreciation is expected to continue to perform exceptionally well over the next 5 years, notably in the southern emerging markets, and the longer investors are able to leave capital in their purchase, the higher their potential returns will be. Tourist levels are high and the resulting strength in the buy-to-let market allows investors to reap in solid capital growth from well located properties, all the while supplementing this income with high rental yields in key tourist locations.

Level of Complexity

For mid to long term investors, all purchase costs will be applicable, of around 10% of the purchase price while ongoing costs such as maintenance, community fees and utility bills will also need to be factored into the strategy finance plan. Bear in mind it's advisable to open a bank account in Bulgaria in order to pay for the property's utilities and other ongoing expenses.

Some good arrangements are often to be made with property management and rental companies that are usually conveniently based on or near the site. These ensure that such ongoing costs are covered and that your unit is rented out regularly. Maintaining a property abroad can therefore become no more complex than an investment closer to home.

Key Risks

A medium to long term investment strategy entails much lower financial risk than a short term plan which relies on finding a buyer within a very short time frame. Provided the right investment is made on a quality, well located project with multiple facilities, establishing a rental market and eventually a buyer for your investment should not be difficult. However, as with any investment, patience and money is sometimes required until the end user is found.

Bulgaria's strong, growing tourist market of course translates to an increase in buyers and renters on the one hand, but brings with it intensified competition on the other; careful attention needs to be paid to how much similar property is under construction in the hotspot you are considering.

By appointing independent legal representation, you can be sure that all the necessary paperwork is in place before signing the purchase contract.

Property ownership in Bulgaria is 100% freehold, leaving no room for ownership disputes.


The Bulgarian property market today continues to grow in accordance with expert forecasts. Real estate prices in some locations here have been rising by more than 30% per annum; one of the highest rates in the world. You can still purchase a comfortable, well renovated property in a good area for approximately £50,000. In the light of growth figures, this is a key opportunity for medium, long and shorter term investors alike.

Bulgaria is considered to be one of the most rapidly advancing nations in Europe today and is renowned for foreign property investment in its coastal and mountain areas. With excellent property prices and high capital growth projections, combined with Bulgaria's natural advantages such as sun, sand, sea, skiing, beautiful landscapes and thriving economy, property investors continue to see this Eastern European location as one of the world's most encouraging emerging markets.

Investors are capitalizing upon important features such as its eleven "Blue Flag" beaches along 354km of Black Sea coast, 37,500km of hiking paths, mountain trails and Roman, Greek and Thracian historical attractions, including nine UNESCO (United Nations Educational, Scientific and Cultural Organisation) World Heritage Sites.

By far the most popular option in Bulgaria is to buy off-plan. It makes financial sense to purchase while prices are at their lowest and sell after completion of the project, once capital growth has taken hold.

Please see the example below*

Purchase price = 200,000 EUR
pay 30% deposit = 60,000 EUR
plus 7% IVA (VAT) = 4,200 EUR
Total investment = 64,200 EUR

When the project is finished, if the developer puts up the price by 10%, then the increase is 20,000 EUR.

If you bought the apartment immediately when it was released at 200,000 EUR, then your gain would be as follows;

20,000.00 EUR/ 64,200.00 EUR = 31%

If you had bought it newly built, after the increase, then you would have thrown away a 31% gain!

*This is a simple example without taking potential loan arrangements/costs, ongoing property management and rental returns into consideration. Growth over this period will of course change from year to year, but initial conservative estimates have been used for the purpose of this example.


Due a surge of interest over recent years in property purchase in Bulgaria, Bulgarian bank finance is easily available for foreigners. Mortgages are widely used to finance property purchase in Bulgaria and banks will lend up to 80% of the property price over a maximum period of 20 years.

Mortgages in Bulgaria are repayment mortgages where the borrower pays a combination of capital and interest back each month.

Release of equity from investors' other properties, be it in their country of origin or in other investment locations, can also be an easy option to raise finance for a purchase in Bulgaria.


Depending upon your real estate choice in Bulgaria, taxes and fees will be applicable.

If a company needs to be set up as in the case of land purchases, initial fees and taxes usually amount to around 500 GBP.

Property tax is payable to the local municipality upon purchase but no other transfer taxes are charged on real estate. Where applicable, VAT of 20% is added.

A company investing in Bulgarian rental property is taxed on the gross income derived from the property, minus tax-deductible property-related expenses and depreciation. Such expenses include repairs, maintenance, renovation and similar costs, as well as interest on loans used for acquiring the property. A Municipal tax at a rate of 10% of profits is chargeable. This is then deductible in calculating taxable profits which are subject to a flat corporate tax rate of 15%.

Transactions with land and lease of property for residential purposes are exempt from value added tax. All other real estate transactions are subject to VAT at the uniform rate of 20%. The buyer/lessee is entitled to a VAT refund, provided it is registered for VAT purposes.

Capital gains are treated as ordinary income and are subject to corporate income tax.

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